The Burden Of Decisions

No investment product comes with a label that might fit your needs, so the choice is yours to make. In fact, the burden of taking decisions falls squarely on investors these days

Excessive shopping has become a modern-day bane—it often becomes a financial burden and takes up too much time. Only recently, a friend was ruing how online sites end up affecting her budget and time. “Social media sites take me to these shopping sites. I sometimes spend hours browsing only to add a couple of things to my cart, which I don’t immediately need. But then comes a day when I am feeling a bit low or conversely am happy about a project completion or something else, and I end up clicking ‘Pay Now’, she said.

The explosion of choices has perhaps made buying something one of the most time-taking tasks these days. Imagine buying an air-conditioner. There are a series of decisions you would need to take before you can make a choice—window or split; three-star or five-star; 1 tonne or 1.5 tonne; Indian or foreign brand; and so on. But the decision-making won’t end there. The next step will throw up more choices—lump sum or equated monthly instalments (EMIs); consumer loan or credit card loan; insurance or warranty or both; and so on.

The nature of choices and the number of decisions you make will change with the product, but the process will remain the same, even when it comes to shopping for financial products. There are multiple decisions to be taken—guarantee or risk; liquidity or lock-in; and so on. No product comes with a label that might fit your needs, so once again the choice is yours to make. In fact, the burden of taking decisions falls squarely on investors these days.

Let’s start with tax. The introduction of the new tax regime has put the onus on you, if you earn a higher income than a certain threshold, to calculate your savings in the old tax regime and compare it with the savings under the new tax regime. Also, with the nudge for investing gone for those opting for the new tax regime, you have to make a choice about how much to invest, where to invest and how long to invest on your own.

The recent reversal of the decision to increase the surrender value from life insurance policies again makes you responsible to not fall for the agent’s spiel and become a victim of mis-selling. The regulator has laid the responsibility of assessing the suitability of a policy on the customer. And if you are already in a policy, it is again up to you to assess whether surrender makes sense for you at all, and when.

Equity investments, of course, can be mind-boggling for the breed of investors who are always looking for a get-rich-quick formula. They, too, need to choose from a variety of options—direct equity, mutual funds, derivatives and so on—all of which may not be easy to understand for most investors. Even after choosing a product, there are choices (for instance, the large universe of stocks and mutual funds) within that choice. The safeguards are being discussed by the regulator, but as stock tips and fraudulent advice abound, it is up to the investors to cut through the clutter and find the right path.

But when you choose a product that comes with a sovereign guarantee such as the Employees’ Provident Fund (EPF), you expect it to be a smooth experience. So, when you hear about complaints about rejected EPF withdrawal claims, and the struggle of repeated follow-ups, you might be forced to pause and rethink all your money decisions.

Is a guaranteed rate of return enough for you to choose an investment or should you also look at the ease of transaction? There’s another decision staring in your face.